As central bank digital currencies (CBDCs) in the world's leading economies draw inexorably closer, thoughts turn to who will establish and safeguard the accompanying international norms. Both America and Britain have recently announced that they will be looking deeper into digital currency issuance, with the Federal Reserve in Washington making a point of adding that it wants the United States to play a "leading role" in the development of international standards for CBDCs. As things stand, Asian countries, in particular, are now setting the pace: on Wednesday, South Korea's central bank announced a real-world pilot of a CBDC to begin in August, with participants able to spend e-won by phone until the end of the year at certain retail outlets. A similar, ever-expanding pilot has, of course, been running in China. However, recent reports from users suggest that the limitations of the consumer interface, as well as the potential for state snooping, suffer in their estimation by comparison with universally popular super-apps Alipay and WeChat Pay. Last month, India too revealed plans for its own CBDC, part of a wider vision that will also include banning cryptocurrencies.
The financial establishment, whether in Delhi or Downtown Manhattan, may find cryptocurrency understandably alarming, but speculating in bitcoin, for one, became a mass phenomenon earlier this year, despite concerns of an investment bubble being widely expressed at the dizzying peak last month. The hoped-for riches might never materialise, but the boom does mean that many people have become familiar with the idea of money that exists only as bits and bytes on a network, with no paper or metal incarnation whatsoever. As cryptocurrency goes mainstream, Apple is looking for a new business development manager with experience, leading observers to believe that it may open up a new payment method for its products and on its app store. The company is "looking for a candidate who is comfortable with ambiguity, enjoys thinking about edge cases and asking 'what is an alternative way of doing this?'", according to the job posting. In another telltale sign of Silicon Valley ambition, digital sleuths at Bloomberg have noted that Square, to go by some recent code in an app update, is preparing to launch savings and current accounts aimed at small business customers. The programming language also appears to suggest that there will be no monthly service fees or the charges that customarily accompany minimum balances or overdrafts.
As Verisk Financial Research's new market report for the United Kingdom points out, there seems little consumer appetite for the newest payment methods, even though all the ingredients (high smartphone and card network penetration, together with a plethora of mobile wallet apps) are present and correct. Not so in Australia, where digital wallets appear to be on the cusp of leapfrogging contactless plastic as the payment method of choice at the point of sale. According to new figures from Commonwealth Bank of Australia, one of the country's dominant Big Four, the twelve months following the Covid-19 outbreak saw monthly by-device transactions up by 90 percent, with the monthly value involved by the end of the period twice what it had been before. The result is that, in March of this year, more than 40 percent of CommBank's contactless card transactions were, in fact, happening through an app rather than plastic. If that trend is maintained, the digital wallet will overtake tapping by card before the end of this year.
To end, here are links to some other stories of interest this week...
Australia: Lawmakers consider banning credit cards for online gambling
Brazil: StoneCo investing $471m in digital lender Banco Inter
UK: HSBC and Barclays call for Open Banking reform over higher costs
US: $40 late fees a new normal for credit cards
US: HSBC to exit American retail banking as Asian focus intensifies
The Weekly News Digest from Verisk Financial Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
About Verisk Financial Research The market-leading online, interactive database and data dashboards covering the global cards and payments industry in detail, plus a range of data-packed country and regional reports. Leveraging financial cards data going back to 2010 – and forecasts up to 2022 – our unique datasets cover 72 countries around the world and feature more than 250 metrics per market.